McCain injects presidential politics in bail-out deal

A renegade bloc of Republicans moved to reshape a massive bailout of the U.S. financial system Thursday, surprising and angering Bush administration and congressional leaders who hours earlier announced agreement on the "fundamentals" of a deal. At the White House meeting that included President Bush, top lawmakers and both presidential candidates, House Minority Leader John A. Boehner (R-Ohio) floated a new plan for addressing the crisis that has hobbled global markets. Democrats accused Boehner of acting on behalf of Republican presidential candidate Sen. John McCain (Arizona) in trying to disrupt a developing consensus. The new proposal also displeased White House officials, including Treasury Secretary Henry M. Paulson, Jr., who chased after Democrats leaving the meeting and - half-jokingly - dropped to one knee and pleaded with them not to "blow up" the $700 billion deal, according to people present at the meeting. Under the alternative Republican plan, the government would set up an expanded insurance system, financed by the banks, that would rescue individual home mortgages. The government would not have to buy up the toxic mortgage-backed assets that are weighing down financial institutions. The apparent breakdown Thursday followed a lunchtime declaration by Republicans and Democrats in the Senate Banking and the House Financial Services committees that they had come to a general accord on many outstanding issues. During a nearly three-hour meeting, lawmakers reached an "agreement on principles." Under that agreement, the package would be broken into three parts. Paulson would receive $250 billion immediately and $100 billion more upon certification that the funds are necessary. The final $350 billion could be dispersed without additional congressional approval, but Congress would be given 30 days to object. The agreement calls for strong oversight of the bailout program, including an independent Inspector General and regular audits by the Government Accountability Office (GAO). It also would require the Treasury to set standards to ban "inappropriate or excessive" compensation for executives at participating firms and establish stronger protections for taxpayers, including a requirement that they receive equity in all participating companies. The latter provision ensures that the Treasury could recover the cash it invests in bad assets if the firms return to financial health. "We've reached fundamental agreement on a set of principles," said Sen. Christopher J. Dodd (C-Connecticut), chairman of the Senate Banking Committee, adding that a bill could pass within days. Less than 30 minutes later, however, Rep. Spencer Bachus (R-Alabama), who had attended the meeting on behalf of House Republicans, denied that an agreement had been reached. While progress was made on peripheral issues, Bachus said, House Republicans remained adamantly opposed to the central point of the plan: purchasing bad assets from struggling firms. Bachus said, "John's not trying to call the shots for the House caucus, I can tell you that. He's just opposed to the plan in its present form." Frank reacted angrily to Bachus' remarks, saying lawmakers had been well on their way toward a bill they could put to a vote and accusing McCain of engineering a breakdown. "This is the presidential campaign of John McCain undermining what Hank Paulson tells us is essential for the country," he said. Frank was in a fury as he and other Democrats departed for the late afternoon meeting at the White House, a remarkable event given Bush's efforts to stay out of the presidential campaign. Despite expectations that a deal was near, Boehner took off in a different direction during the meeting, saying the bailout plan was not gaining traction among rank-and-file House Republicans. As Obama and Frank peppered Boehner with questions about the new proposal, Bush rejected the idea as a too-broad rewrite of his administration's plan, according to the handwritten notes of one Democrat present. "Don't start over," said Bush. "Don't start over."

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YouTube | September 27, 2008

Tags:. .dropped. .issues. .banks. .banking. .global